Daily Financial News Analysis – 22nd Feb’20

Table of Contents

Telcos

The government is considering the possibility of setting up a stress fund for the telecom sector that could lend to companies such as Vodafone Idea to help them meet AGR dues as part of a comprehensive relief package.
Other measures being discussed include a deferment of licence fee and spectrum usage charge (SUC) payments.
The committee set up under cabinet secretary Rajeev Gauba is considering whether banks could be asked to create this fund and is currently looking at other measures such as deferment of LF and SUC for a substantial period.
Stressed telcos, particularly Vodafone Idea, could borrow from this fund to pay their AGR dues and then repay their loans on easy terms over a period of time.
The telecom industry has also underlined the critical need for a further rise in tariffs to strengthen the long-term health of the sector.
There is a need to provide both a short-term fix and a long-term fix for the sector.
Cash-strapped Vodafone Idea-—financially the weakest of India’s three operating private sector telcos—has so far paid only ₹3,500 crore of the ₹57,000 crore dues estimated by the Department of Telecommunications (DoT).

State-run banks are not out of the woods yet, as new stress has emerged in the agriculture, MSME, commercial vehicle, telecom and real estate sectors in the fiscal third quarter.
Farm loan waivers in Uttar Pradesh, Maharashtra, Tamil Nadu and Punjab added ₹60,762 crore in gross bad loans to the books of SBI, Punjab National Bank, Bank of Baroda and Bank of India, increasing their non-performing agriculture credit by 30% from a year earlier.
Gross bad loans in the MSME space rose 6% to ₹66,280 crore.
These data damp expectations that state-run banks were on a path to recovery, after a disappointing fiscal 2019 when huge provisioning against bad loans had pushed them into losses.
In the first half of this fiscal year, they had cut bad loans and reported improved financial performance.
The top half of a dozen public-sector banks — SBI, Bank of Baroda, Bank of India, Canara Bank, PNB and Union Bank — reported nearly 40% higher average slippages across sectors over the previous quarter.

US trade representative Robert Lighthizer won’t be part of the high-powered delegation accompanying President Donald Trump, further dimming hopes that any headway will be made in complex negotiations for a trade deal.
However, other senior members of the Trump administration, including national security advisor Robert O’ Brien, commerce secretary Wilbur Ross and energy secretary Dan Brouillette will visit India, with five pacts likely to be signed covering homeland security, trade facilitation and protection of intellectual property rights.
Lighthizer’s absence — his name is not on the official delegation list — comes after the two sides have been unable to conclude trade negotiations and delinked the deal from the visit of the US President.
Lighthizer had earlier dropped out of a visit for negotiations with commerce minister Piyush Goyal prior to the bilateral summit.
Both the US and India have suggested that the deal needs more time as differences still remain and that a larger free trade agreement (FTA) is in the works to unlock bilateral trade potential.

President Donald Trump’s visit would see India and US forging a technical cooperation for relatively green market of municipal bonds for urban projects.
The US treasury department would provide technical know-how to six cities, including five smart cities, to float municipal bonds for water supply and sewer projects.
The US treasury department would sign memorandums of understanding with six cities with high credit ratings and have done the necessary groundwork for floating municipal bonds to raise money for big ticket urban renewal projects.
These include Mysuru and five smart cities of Rajkot, Vadodara, Lucknow, Pimpri Chinchwad, Mangaluru.
This would be the first time these cities would raise money from the open market through municipal bonds.
The bond market is relatively new for cities in India.
Seven other cities have also raised funds worth ₹3,200 crore for municipal projects. These include Hyderabad, Indore, Amravati, Bhopal and Visakhapatnam.
________ the first city to use municipal bonds method to raise money for a water supply project in 2017. It has raised ₹200 crore.

The spadework for this cooperation started in November 2019 when there were indications that US Economic and Financial Partnership programme could extend this technical assistance to more cities.
The ministry of housing and urban affairs gauged credit ratings of all cities and asked cities to give a proposal.
The project was then put before Niti Aayog and department of economic affairs for their approval.
After necessary go-ahead, 13 cities were shortlisted and eight cities were found better prepared to float bonds than others.

Small states like Haryana & Uttarakhand emerged as the best states at No 1 and No 2 with Haryana reporting ₹4,782 crore DBT pay-out in over 4 crore transactions.
Mamata Bannerjee-ruled West Bengal has emerged as the worst while new Union Territories (UTs) of Jammu & Kashmir (J&K) and Ladakh notched up an impressive show in ratings prepared for the first time by the Centre regarding Direct Benefit Transfer (DBT) pay-outs.
In a surprise in the ratings chart for 2019-20, J&K and Ladakh clubbed together got the No 8 spot among 36 states and UTs, reporting DBT payouts worth ₹1,190 crore through over 80 lakh transactions.
The ratings ranked states as per DBT pay-outs compared to their population.